Examining the validity of a test of futures market efficiency
In investigations of the efficiency of futures pricing, empirical estimates of fixed parameters in the model have led to the conclusion that the futures prices offer inefficient (or biased) estimates of the futures (or spot) prices at contract maturity. Maberly (1985) disagrees with this conclusion...
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| Veröffentlicht in: | The journal of futures markets 1988-06, Vol.8 (3), p.365-372 |
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| creator | Elam, Emmett Dixon, Bruce L. |
| description | In investigations of the efficiency of futures pricing, empirical estimates of fixed parameters in the model have led to the conclusion that the futures prices offer inefficient (or biased) estimates of the futures (or spot) prices at contract maturity. Maberly (1985) disagrees with this conclusion and argues that the empirical findings are the result of the application of ordinary least squares (OLS) to censored data. An attempt is made to show that Maberly's censoring argument is incorrect. The alternative explanation offered is that the results are biased because the explanatory variable is a lagged value of the dependent variable. The bias results from the correlation between the independent variable and previous values for the error term. The alternative explanation is supported with Monte Carlo evidence. There is important real-world significance to the results because several empirical studies have shown that spot prices are well approximated by a random walk process. |
| doi_str_mv | 10.1002/fut.3990080309 |
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Fut. Mark</addtitle><date>1988-06</date><risdate>1988</risdate><volume>8</volume><issue>3</issue><spage>365</spage><epage>372</epage><pages>365-372</pages><issn>0270-7314</issn><eissn>1096-9934</eissn><coden>JFMADT</coden><abstract>In investigations of the efficiency of futures pricing, empirical estimates of fixed parameters in the model have led to the conclusion that the futures prices offer inefficient (or biased) estimates of the futures (or spot) prices at contract maturity. Maberly (1985) disagrees with this conclusion and argues that the empirical findings are the result of the application of ordinary least squares (OLS) to censored data. An attempt is made to show that Maberly's censoring argument is incorrect. The alternative explanation offered is that the results are biased because the explanatory variable is a lagged value of the dependent variable. The bias results from the correlation between the independent variable and previous values for the error term. 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| ispartof | The journal of futures markets, 1988-06, Vol.8 (3), p.365-372 |
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| source | Periodicals Index Online; EBSCOhost Business Source Complete |
| subjects | Dependent variables Economic models Effectiveness Efficiency Efficient markets Estimates Futures Futures market Prices Sociology Statistical analysis Studies Tests |
| title | Examining the validity of a test of futures market efficiency |
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